Hi, In q5.14 in question Bank, the question states that the investment in the mills are done at the start of the next 5 years. So in this sense, it means that the first investment is made at time 1 and so on. This we should be calculating the PV at time 0 and not at time 1. But in its solution, it appears that the question has taken the first investment at time 0 and not time 1. Accordingly it did the sum. So I want to ask that why did we take the PV at the date when the first mill was bought and not one year before it? Thanks & Regards Shyam
Sir, Thank you for your reply. I get your point but my query still holds. The question is stating that the first one is bought from the next year (the year start of the next 5 years). So accordingly shouldn't we take the time of purchase as 1 and not 0? Thank you for your help! Regards, Shyam
"One mill is purchased at the start of each of the next 5 years. The cost of refurbishment is £20,000 per mill and is payable continuously for one year after the purchase. " I can't see where you are getting your idea from the start of each of the next 5 years are times 0, 1, 2, 3, 4.